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1. RATIONALE FOR THE CREATION OF A PUBLIC INVESTMENT MANAGEMENT SYSTEM (PIMS) IN JAMAICA The Government has committed to strengthen Jamaica’s public investment management system, as part of a comprehensive public financial management (PFM reform) agenda. This reform has seen the incorporation of public investment management as part of an enhanced fiscal governance framework that seeks to increase fiscal surpluses over time and concurrently reduce the debt to gross domestic product (GDP) ratio so that public resources can be allocated to public investment and other activities that have the potential to contribute to growth in the economy.

Cabinet Decision No X of March 2014 gave approval for the institutionalization of the Public Investment Management System (PIMS) and, in doing so, standardize the treatment of public investment across the public sector with respect to the entire project cycle.

Public investment projects are investments that require planning, execution, monitoring and evaluation carried out as an integrated set of activities aimed at meeting a development objective, at a specific cost and within a defined timeframe(Section 48A, FAA Act Amendments 2014). The Financial Administration and Audit Act (FAA Act) (Amended), 20141 sets out the elements of the strengthened Public Investment Management System (PIMS) which will seek to create a common framework for the preparation, appraisal, approval and management of all public investments in Jamaica, irrespective of the source of funding or procurement and implementation modalities. A key element of the system is the Public Sector Investment Programme (PSIP); a rolling 5 year plan of Cabinet approved public investment projects.

Since these amendments, more legislative and regulatory work has been done to further refine the PIMS and, by extension, the PSIP. In February 2015, additional amendments to both the FAA and PBMA provided for exceptions to the definition of public investment. The exception limits public investment to those undertaken by entities within the specified public sector. The specified public sector is defined as the public sector minus those entities that will be certified as commercial by the Auditor General and, therefore outside of the fiscal rules, as at April 1, 2017. It is anticipated that only a few entities will qualify and the specified public sector will encompass much more than 90% of the public sector. The ambits of the PIMS and PSIP, therefore, is quite extensive in scope.

The Financial Administration and Audit (Amendment) Act 2014 – Fourth Schedule (Section 48B (2) provides that an element of the Public Investment Management System shall be a Public Investment Performance Report. This is a comprehensive performance report on the Government’s Public Investment Programme, which shall be produced and published periodically by the Minister.

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1.0. Background:

1.1. Rationale for the creation of a public investment management system (PIMS) in Jamaica: The Government has committed to strengthen Jamaica’s public investment management system, as part of a comprehensive public financial management (PFM reform) agenda. This reform has seen the incorporation of public investment management as part of an enhanced fiscal governance framework that seeks to increase fiscal surpluses over time and concurrently reduce the debt to gross domestic product (GDP) ratio so that public resources can be allocated to public investment and other activities that have the potential to contribute to growth in the economy. Public investment projects are investments that require planning, execution, monitoring and evaluation carried out as an integrated set of activities aimed at meeting a development objective, at a specific cost and within a defined timeframe (Section 48A, FAA Act Amendments 2014). The Financial Administration and Audit Act (FAA Act) (Amended), 20141 sets out the elements of the strengthened Public Investment Management System (PIMS) which will seek to create a common framework for the preparation, appraisal, approval and management of all public investments in Jamaica, irrespective of the source of funding or procurement and implementation modalities. A key element of the system is the Public Sector Investment Programme (PSIP); a rolling 5 year plan of Cabinet approved public investment projects. The Objectives of the PIMS are to:

Promote growth and development and encourage capital formation for future investment

Maximize efficiency of public investment “through better selection and management of investment expenditure.”

Improve the quality of social and economic infrastructure in the country. PIMS is an integrated approach to managing the public investment portfolio and projects, which is:

Extensive; extends across all public entities and sectors • Inclusive; includes all type of public sector expenditures (actuals and

contingencies) • Complete; covers all steps and phases that a project has to complete through

its productive life, including the interaction with other administrative systems (budget, treasury, procurement, human resources, others).

Strategic; all projects and overall portfolio will be selected and oriented to add value to a larger development purpose

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component 5, Fostering Industrial Growth and Trade Facilitation, that will support

strategic public-sector institutions essential to creating an enabling environment for the

private sector. The management of the project makes up the sixth component.

Strengthening of the Public Investment Management System (PIMS) is a sub-set of

Component 1 which falls under the first thematic area “Strengthening the PIMS”.

PIMSEC therefore currently operates under Component 1 of the SPSTP. The executing

agency for the project is the Ministry of Finance and The Public Service (MOF&PS) and

the Project Implementation Unit (PIU) is established within the MOFP to implement

the project. The project will support activities across selected service delivery ministries,

departments, and agencies (MDAs).

2.2. The Committee">Public Investment Management Committee (PIMC) Under Section 48 B (2) D of the amendments a Committee">Public Investment Management Committee is to be appointed to:

a. Screen all investment proposals for feasibility and consistency with government’s strategies and objectives

b. Review all projects for technical, financial, economic and environmental feasibility

c. Prioritisation of projects for financing and recommending to Cabinet their inclusion in the Public Sector Investment Programme, and

d. Reviewing project performance, monitoring risks to the achievement of objectives and continued relevance to government’s policy priorities

General Features of the PIMC: The main role of the Committee is to review/screen projects which are submitted for consideration for inclusion in the PSIP; review the recommendations of the PIMSEC concerning these projects and take a decision to approve, defer for further work or reject.

The two main functions of the PIMC in supporting this model are:

Project Approval - this is to ensure that project concepts and proposals are aligned with policy objectives and that submitted projects are technically, economically, and financially viable. Project approval is done in two phases

Phase one – Project concepts/ideas are assessed for alignment with policy positions as articulated in the PSIP Policy Paper, the Medium Term Social and economic Framework and the National Development Plan Vision 2030. It is after this approval that projects are approved to be fully designed.

Phase two – Project documents are appraised for financial and relevance approval, Funding agency for feasibility analysis, and submitted to Cabinet for final approval and inclusion in the PSIP.

Project Monitoring and Evaluation under PIMSEC - covers the pre- implementation stages of the project cycle, and involves design of the M&E

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1.0. BACKGROUND:

The Government has committed to strengthen Jamaica’s public investment management system, as part of a comprehensive public financial management (PFM reform) agenda. This reform has seen the incorporation of public investment management as part of an enhanced fiscal governance framework that seeks to increase fiscal surpluses over time and concurrently reduce the debt to gross domestic product (GDP) ratio so that public resources can be allocated to public investment and other activities that have the potential to contribute to growth in the economy. Cabinet Decision #38/13 of October 2013 gave approval for the institutionalization of the Public Investment Management System (PIMS) and, in doing so, standardized the treatment of public investment with respect to the entire project cycle. Public investment projects, have significant budgetary impact requiring fiscal prudence and are formally defined as investments that require planning, execution, monitoring and evaluation carried out as an integrated set of activities aimed at meeting a development objective, at a specific cost and within a defined timeframe (Section 48A, FAA Act Amendments 2014). The Financial Administration and Audit Act (FAA Act) (Amended), 20141 sets out the elements of the strengthened Public Investment Management System (PIMS) which will seek to create a common framework for the preparation, appraisal, approval and management of all public investments in Jamaica, irrespective of the source of funding or procurement and implementation modalities. A key element of the system is the Public Sector Investment Programme (PSIP); a rolling 5-year plan of Cabinet approved public investment projects. Since these amendments, additional legislative and regulatory work has been done to further refine the PIMS and, by extension will have a bearing on the PSIP. In February 2015, additional amendments to both the FAA Act and the PBMA Act provided for exceptions to the definition of public investment. The exception limits public investment to those undertaken by entities within the Specified Public Sector. The Specified Public Sector is defined as the public sector minus those entities that will be certified as commercial by the Auditor General and are therefore outside of the fiscal rules, as at April 1, 2017. It is anticipated that only a few entities will qualify and the Specified Public Sector will encompass much more than 90% of the public sector. The ambits of the PIMS and PSIP, therefore, is quite extensive in scope.

1 Gazette 31st day of March 2014, enacted April 1, 2014

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Ministry of Finance and the Public Service Fiscal Policy Paper 2017 97 | P a g e

Appendix VI

PUBLIC SECTOR INVESTMENT PROGRAMME FY 2016/17 –FY 2020/21

Reform of Public Investment in Jamaica The Ministry of Finance and the Public Service has successfully implemented many of the key activities in the Public Financial Management (PFM) Reform Programme. The primary objective of the Reform is to enhance efficiency of the process and one of its key elements is the establishment of the Public Investment Management System (PIMS).

In fiscal year 2014/15 the Ministry of Finance and Planning in collaboration with the Planning Institute of Jamaica completed the amendments to the Financial Administration and Audit (FAA) Act to strengthen the legislative framework for the PFM reform specifically the PIMS. The legislation was Gazette in April 2014.

Through support from the Strategic Public Sector Transformation Project (supported by a World Bank Loan of US$35mn) in fiscal year 2015/16 the Ministry of Finance continued the implementation of the reform and has achieved major milestones in the development of the PIMS. These milestones include:

Establishment of the PIMS Secretariat (PIMSEC) - the Secretariat is housed in the Planning Institute of Jamaica, however, it is an agency of the Ministry of Finance and the Public Service. It is the central point of entry of all projects to be included in the PSIP. The PIMSEC is the key technical body for public investment planning and implementation and provides technical advice to the Cabinet through the Committee">PIMS Committee on investments that are to be included in the PSIP. The PIMS Secretariat directly supports the work of the Committee">PIMS Committee which makes the final decisions on the composition of the PSIP. The Secretariat is fully equipped and is 80% staffed. Up to December 2016, the Secretariat reviewed over 80 investment projects with an approximated total value of US$700mn. These include major investments in transportation, infrastructure enhancement, social protection and governance.

Within the fiscal year 2017/2018 the PIMSEC plans to begin the mid-term assessments of key projects within the PSIP to ascertain their viability for continued support and to better advise the Ministries, Departments and Agencies of remedial actions that may be necessary so as to improve the effectiveness and efficiency of the investment in attaining its mandate.

Hosting of Committee">PIMS Committee Meeting - The Committee is chaired by the Minister of Finance and the Public Service and supports the review of all public investments. The Committee was reconstituted in Fiscal Year 2016/17 and now has membership from the Ministers of MICAF, Health, and MEGJC Under the amended FAA Act, all Pubic Investments must be reviewed by the Committee">PIMS Committee.

Development of PIMS Guidelines - After consultations that were completed in FY 2014/15 and 2015/16 the Cabinet has approved the guidelines for the Public Investment Management System. The guidelines, as defined by the amended FAA (2014), establishes some common parameters for the governance framework of the PIMS, and sets out the processes and procedures used by the GOJ to approve and manage Public Investments in Jamaica at all stages of the investment life cycle.

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